Vast majority of SMEs passing inflation and energy costs onto customers

Three in four small and medium sized enterprises have increased prices for customers due to inflation and energy costs, according to a report from Bibby Financial Services, a leading provider of financial support to Irish businesses.

This study is based on research of 250 Irish SME owners across the manufacturing, construction, wholesale, transport and services sectors. Research was conducted by independent specialist Critical Research between March 11th and 21st.

The report said rising costs continue to present a “significant challenge” for SMEs, with 52 per cent citing inflation and high costs as a primary concern, closely followed by energy costs (51 per cent).

Businesses said operating costs have increased by an average of 10 per cent, rising to nearly 13 per cent in the construction sector.

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The number of businesses that have passed these additional costs onto customers rises to 83 per cent in the transport sector. One in five said they are unable to pass on costs and are absorbing the impact.

Margin pressure is particularly acute among larger SMEs, as 90 per cent of businesses with turnover above €5 million reported reduced profitability.

SMEs said they are also dealing with increased risk in their supply chains and customer base.

In the past six months, 55 per cent have had a supplier become insolvent or stop trading, while 54 per cent have experienced a customer becoming insolvent or ceasing operations.

On average, SMEs reported two suppliers and two customers have become insolvent or stopped trading in the past six months. Two fifths of SMEs have also suffered a bad debt in the past year, with wholesale businesses particularly exposed.

More than half of SMEs expect international trade to increase over the next 12 months. At the same time, 65 per cent of SMEs are exploring merger or acquisition activity for 2026.

Six in 10 businesses reported increased sales over the past six months, up from 53 per cent in the previous wave of research. Looking ahead, 71 per cent said they expect sales to rise further, increasing to 78 per cent among SMEs using external finance.